GMAC Bonds.

[brewer12345]

Bonds are definitely a different ballgame.

Not sure I agree. High grade bonds (single A rated or better) are basically portfolio de-riskifiers in that they are good for reducing overall volatility. Junk bonds, OTOH, should be looked at as high yielding equities with capped upside. Triple and buble B rated bonds are somewhere in between.

 

[unclemick]

Hmmm

So the junk bond investor is viewing the 'capped upside' as his guanteed return - if his bet against the market consensus is correct.

Am I following you correctly?

 

[MasterBlaster]

The Sure Thing

The Sure Thing...

Well now that we have determined that GMAC bonds are a sure thing we should all put most of our nestegg in. Maybe we'll diversify into some DELPHI bonds for safety though.

If you don't go broke and don't have to go out and beg for money you can tell all your friends how smart you are !

 

[brewer12345]

Hmmm

So the junk bond investor is viewing the 'capped upside' as his guanteed return - if his bet against the market consensus is correct.

Am I following you correctly?

I'm not sure I would use the word "guarantee" at all when talking about junk.  I think a reasonable way to put it is that you always know the max you can get from a junk bond (or close to it): par.  If you buy something at a discunt and it goes to par or over, you sell, aside from certain special situations.

 

[REWahoo]

Re: The Sure Thing

If you don't go broke and don't have to go out and beg for money you can tell all your friends how smart you are !

Would love to stay and chat, but today is our 4 hour hike, a bunch of ER's, we wander the back woods and just chat about stuff.

 

[BigMoneyJim]

I think JG is still online but over at raddr-pages.com . I haven't checked lately, though.

 

[cute fuzzy bunny]

Yeah he is (or was, I havent been over there for a few weeks either).

He was trying the same routine over there. Nobody was responding to him. Seemed to be petering out.

 

[Maximillion]

My Dad, downsized at 55, sold his Bungalow for $80,000, invested in Bonds, moved into small house , lived on his Pensions(never made more than $20,000 U.S.a year, 9 kids), now 87 and Guess What, He Was Right.

Hopefully he will live to be at least 100, which means his money should double and then double again.

My Daddy taught me.

 

[ESRBob]

My Math should have said $16 Capital Appreciation, add on 5 years of receiving Annual Payments of $6.10 gives you $16+ $31.1(Non Compounded) for a total return of $47 or 56%.

$84, 000 would be worth $168,000, then $336,000, then $672, 000, then $1,344,000.00 etc.

26 Years to turn $84,000 into $1,344,000.00

32 Years $2,688,000.00

From Bonds, Less Risk than Stocks, Interest Payments, start at 25 at 57 you will be as indifferant to people's comments as I am.

$5,000 a Year Deductible Interest.

Max,
I was the one telling JG he was at risk a year ago when he bought into these GMAC bonds, but I understand they have been coming back so if you bought them recently I am sure you are sitting on some profit.

What I don't understand is your figures above -- I follow the 56% profit if these things go to par in 5 years, but that would make 84k go to 131k in 5 years (not 168k,) and then what about the assumed compounding at the same rates for all those additional years -- Is this assuming additional bonds bought on the same terms? Once these guys get to par in 5 years (assume), then you're only earning your coupon, not todays current Yield to Maturity. Maybe this was the math you were correcting?

Anyway, I can understand someone wanting to buy high yield bonds if they really know what they are doing, but most of us don't want to worry about any piece of our portfolio that much. Not 'cause we're wimps but because we spent enough years worrying about our portfolios and now just want to rebalance every year and do other stuff.

Hope you had a good hike today. Where did you go?

btw REWahoo -- cool pix of JG and DW 4-wheelin'

 

[Maximillion]

ESR, the Bonds are redeemable at Face Value, then I guestimated using the n/72 =2x.

I was just trying to illustrate that even with a Reasonable Rate of return of 11% or so, the magic of compounding, and that also bonds present a viable and possibly less risky alternative to Stocks.

GM will NOT go bankrupt, politics not economics will ensure that, but in the case of such a potential, bond Holders will generall get a % on the $, stock holders end up with Zero.

I also tried to point out that any Investment should not be an over committal but a reasonable % so that if things did happen, it is an inconveniance not a Catastrophe.

I never owned Google, EBay, or Yahoo, I do like ETF's.